134
135
CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
The JFTC issued its first survey in March 2019, “in order to identify whether or not there are trade practices in the credit card market which are likely to be problematic under the Anti-Monopoly Act (AMA) 341 and competition policy.” 342 The average merchant discount rate was found to be 3.2%, with the report concluding that “the JFTC hopes that payment network operators and credit card companies will utilize this report to prevent violations of the AMA and take steps for procompetitive practices.” Following this report, the Japanese government introduced a nine-month points program designed to offset the cost of a national sales tax increase from 8% to 10% and to encourage small retailers to accept cashless payments. As part of this program, Japan introduced a 3.25% interchange cap on credit card fees for nine months from October 2019. 343 However, following significant pushback from the credit card industry, lawmakers reversed their stance, allowing card companies the discretion to decide whether or not to uphold the cap when the program expired in June 2020. 344 In its second survey report on the card market in April 2022, the JFTC identified that the average cost of processing credit cards for merchants decreased from 2019 to 2022. Japanese merchants, on average, experienced a reduction of card costs from 3.2% to 2.7%, with much of this difference felt by smaller to mid-size merchants (Graph 5.7). 345 The JFTC also provided more granularity behind fees, with key cost differentials identified between House Cards (2.51%), Category 1 (2.63%), and Category 2 (2.89%). 346
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
Annual Sales (Yen Million)
Survey 2019
Survey 2022
Graph 5.7 – Average Merchant Fees by Merchant Size, 2019 vs. 2022
The reduction of cost may be attributed to changes in Japan’s payments policy since 2019. In particular, as part of its goals to achieve 40% cashless payments by 2025, the Ministry of Trade and Industry (METI) has been providing government grants to cover the cost of purchasing or leasing POS terminals compatible with cashless payments and to mitigate the initial investment for merchants, particularly small businesses.
JFTC INTERVENTIONS Since the 2022 report, the JFTC has introduced transparency requirements to address the lingering high cost of card acceptance in Japan: 347 348
November 2022 Mastercard, Visa, and UnionPay begin publishing their standard interchange fees under the direction of the JFTC and METI
June 2023 JCB disclose its allocation rate between its issuer and acquirer fees to the merchant under the direction of the JFTC and METI
341 The Anti-Monopoly Act: Remarks as we celebrate the 70th anniversary of the Antimonopoly Act | Japan Fair Trade Commission (jftc.go.jp) 342 SurveyonCreditCardMarketReport.pdf (jftc.go.jp)
April 2022 JFTC releases its report on a credit card survey collected from 2020 to 2021.
343 https://asia.nikkei.com/Economy/High-credit-card-fees-threaten-Japan-s-push-to-go-cashless 344 https://asia.nikkei.com/Economy/High-credit-card-fees-threaten-Japan-s-push-to-go-cashless
345 This is based on a simple average of the respondents surveyed by the JFTC. When calculated as a % of annual sales, the average merchant fee fell from 1.7% in 2019 to 1.66% in 2022. See https://www.jftc.go.jp/houdou/pressrelease/2022/ apr/220408_pressrelease2.pdf 346 The JFTC splits the networks in the following categories: • Category 1: International networks that are not responsible for card issuance and managing member stores, i.e., Visa, UnionPay, Mastercard. • Category 2: International networks that are responsible for card issuance, i.e., American Express, JCB, and Diners. • House Card: Cards without international branding
Figure 5.4 – JFTC & METI Ongoing Reforms
347 https://www.meti.go.jp/english/press/2022/1130_003.html 348 https://www.meti.go.jp/english/press/2023/0601_002.html
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